How To Get Product Market Fit?Jan 17, 2023
Have you ever heard of the term “product market fit”? Do you understand why it's important for a startup to achieve it? If not, then you're in the right place.
Product market fit is an important concept that many startups struggle with. It ensures that there is enough demand in the market for the product and that customers actually want what is being offered. Moreover, it is a necessary component of success, as it can mean the difference between a thriving business and one that struggles to survive.
In this article we will take a look at what product market fit is and why every startup should strive to achieve it. We'll discuss how to identify strong product-market fit, why it's important for new businesses, and some strategic steps that entrepreneurs can take in order to reach their desired level of product market fit.
What is product-market fit (PMF)?
According to Benchmark Capital, co-founder Andy Rachleff, Sequoia Capital founder Don Valentine developed the thinking behind PMF, but it was Andy who first put a name to it. VC Marc Andreessen of Andreessen Horowitz would later popularize the term in the mid-2000s.
PMF is the process of tailoring a product or service to the needs and values of a specific market. It is the intersection between customer demand and features to offer, where customers perceive that what your business offers closely meets their needs.
Achieving PMF is an essential step for any business to succeed. It involves understanding which target markets are receptive to the particular value propositions offered by a product or service, as well as ensuring that these value propositions meet customer requirements adequately and in a timely and cost-effective manner.
The key to achieving successful PMF is starting with research on your ideal customers’ wants, needs and preferences. This could involve using surveys, focus groups, interviews and market segmentation in order to get a better understanding of what people want and how best to meet those needs. The end result will be a product that solves problems for people in a way that no other product does so perfectly! This can give you insights into what they care about most when it comes to choosing an offering from your business, such as whether they would prefer a product or service based largely on convenience versus value for money.
You can then consider how you need to modify existing features or create new ones in order to improve both user experience and customer satisfaction, whilst taking account of prevailing market trends too. You should also develop detailed marketing plans and use various types of low-cost experimentations prior to releasing major products or services so that when these do launch there is already an existing base of satisfied customers who understand their advantages.
What are key components in order to achieve PMF?
Good market and good product are two of the most important elements in achieving a successful PMF. Having a good understanding of the target customer and their needs is essential to creating an effective solution that meets their needs. Markets are often huge, so narrowing your focus on identifying the underserved customer profile. Building a business model around underserved customers is a great way to address barriers to entry with players that have millions of dollars in marketing budgets and large product teams. These underserved markets are generally too small of a audience for the big players to care, but are a great ground for small players to get a foothold in establishing their brands. Furthermore, carefully designing and developing a quality product that has high quality user experience will increase chances of customer satisfaction that may currently feel frustrated with their choices available.
Furthermore, it is essential to develop products that have features tailored to individual customers so they can select specific options based on their preferences. Creating products with modular components or personalized functionalities that offer more value to target users can improve user satisfaction even further. Don't get bogged down trying to cater and please everyone, your product roadmap should prioritize features that strengthen your overall value proposition. The core product needs to solve a critical problem for a potential customer, otherwise you won't have a viable product.
Moreover, investing in customer service plays an important role in achieving PMF. Providing a dedicated support team to promptly respond and troubleshoot user issues as they arise can be critical for customer retention and feedback gathering. Utilizing customer feedback regarding how the product could be improved further helps create success with better feature customization options so that customers get what they need when using the product. If you have a customer support staff giving them a level of autonomy will enable them to solve problems faster, and ensure they are providing value to current customers. They are on the front lines of being able to source feedback from customers, especially from those that have used the product and aren't satisfied. Customer support can be a critical arm for being the voice of the customer internally. While customer support agents are usually treated as entry-level positions, as a founder, they can provide great insight on customer concerns - what features are being asked for the most, what are the top 3 most common issues customers currently face, and the impact of quality customer care makes customers feel valued and encourages loyalty from them which increases retention.
Ultimately, selecting the right market before launching a product along with crafting superior quality software tailored to meet customer's needs leads to removing friction while enhancing user experience which ultimately leads to increased customer satisfaction - one of the key components of achieving a successful PMF!
How To Measure PMF
In a perfect utopia, you put out a product that couldn't solve a problem better. You wake up in the morning and your inbox is flooded with happy, pleased and loyal customers sharing their satisfaction and the cash just come rolling through the door. Well, reality is often the quite opposite. The customer support inbox is filled with nothing but complaints, return/exchange requests, sales go up and down regardless of the feature output and you're left as a founder trying to understand the cryptic nature of the market.
So this might depend on the industry and nature of the business, but generally speaking trying to frame key analytics and goals for the company to either hit or miss to give you some semblance of trying to figure out where things are going off the rails is the key to measuring PMF and adapting over time.
The measurement of PMF can be an iterative process that involves multiple steps. One way to begin is by conducting user tests, which involve soliciting feedback from users who are already interacting with your product. This can help you understand how satisfied users are and if any improvements need to be made in order for them to continue engaging with the product. You should have a firm understanding of your customer base, how they engage with your product and what features are in the pipe to further build on their overall experience (again thinking of retention and customer loyalty).
If you want to get PMF, you need to measure it. One of the best ways of doing this is to run a customer survey. This will help you understand what customers are looking for and whether they are satisfied with your product or service. Make sure the survey questions include both open ended questions (to uncover insights) and closed questions (to collect data that can be analyzed). Ask about pricing, features, their opinion on the overall product offering, and any changes they would like to see. Collecting feedback from customers is key to stay in touch with the wants and needs of consumers.
Another way to measure PMF is by looking at your growth rate over time. If your growth rate increases steadily, then this indicates that you have found a level of PMF that is helping more and more people discover, engage, and remain interested in what you offer.
You can also use hypotheses with customers to help you further measure your PMF. You can create surveys or interviews where potential customers provide feedback on why they like or don't like certain aspects of the product. This will allow you not only a valuable window into customer’s opinions but also potential adjustments that could make staying power of the product ideals stronger.
Finally, tracking the organic growth of your product will give you insight into its quality and overall market appeal. Keep an eye out for increases in organic search engine optimization traffic as well as mentions on social media platforms as these two indicators highlight how much traction your product is receiving on a daily basis. Think about the word-of-mouth factor here as well, it's often the most underrated but most impactful for most consumers. Getting a recommendation from someone they trust can go a long way for someone to start engaging with your sales process. These recommendations come from happy customers, so try to keep yourself top of mind and with call-to-actions that can help them spread the word easier (think referral programs, shareable links they can use on social channels, and helpful content they would feel inclined to share with their network).
The tricky part with organic growth is that it doesn't necessarily mean faster growth. So while paid advertising, and other sponsored marketing content be garner some initial traction and growth - startups, especially those that have secured venture capital money quickly lose sight of organic growth and fuel dollars into the traditional Google, Facebook, Instagram ads and while this does gain followers and eyeballs to the messaging it's difficult to measure genuine interest in the product & message.
What if you're wrong?
Okay so you may come up with some general ideas and metrics to try to point the company in the right direction, but let's face it. Things happen. We're wrong, either in the assumptions that we made, something in the market changed and impacted customers' behaviours that's out of our control. So now what? Well, to be honest this is completely normal, and if this didn't happen - you should purchase a lottery ticket because you're incredibly lucky. Things happen and go wrong all the time, the key here is the understand how to adapt, pivot, and try to come up with a hypothesis that you feel again points the ship in the right direction.
Warning to startups: not all feedback is created equal
Getting feedback from users on a startup product is a great way to pinpoint areas of improvement, but it’s important to realize that not all feedback is created equal. When gathering feedback, startups should learn how to filter out bad feedback for the best results.
Bad feedback typically comes from customers who are unhappy about something unrelated or peripheral to the product and don’t articulate their opinions in a constructive candidate. Some bad feedback also comes from users who use the wrong version of your product or whose needs aren’t really addressed by the product, so consulting with these people isn't really going help optimize your product-market fit.
Startups should aim to gather only quality feedback based on the right user segment and relevant usage context. To do that, they need to listen carefully, ask probing questions and follow up on users' comments in order to get a more detailed, thorough understanding of their actual needs. With quality data points, startups are much better positioned for getting an accurate sense of how well their product meets customer needs and improve upon it accordingly.
At the start of the ideation phase of a startup it's incredibly difficult to get feedback in general, you don't have customers to get data from, and you're solely relying on either your gut feel, some anecdotal evidence and if you manage to secure primary research from ideal potential customers directly. You're competing against big players that have designated product management teams internally, teams dedicated to collecting data and analyzing it to stay ahead... so we understand the task may seem daunting. However, the good thing here is this, don't try to be perfect. You just need to understand the core problem and go about launching an initial product that solves the core problem - I'm sure along the way there will be 'nice-to-have' features that will ensure a smooth experience, and they can be implemented later down the line. Product iteration is common, and necessary after you launch, if you try to make it perfect from the get-go you're at risk at either a) never launching the product (because it'll never be perfect) or b) you're going too slow, and others are able to launch a similar product and capture the marker before you're able to establish yourself.
PMF is a two-way street
There is a common conundrum that startups face, sure there is the common problem of no one knowing about your business, but then there's the problem but what happens when everyone knows about your business? You'll see the company get flooded with feature requests, the 'nice-to-haves' and it will become difficult to understand which features should be prioritized.
First of all, you need to ask yourself, who is my customer? Do they fit into my roadmap? Do I want other similar customers using our product? Will we get money from this customer group? What's the overall acquisition cost to acquire them? Different features will appeal to different groups, and because you won't be able to make everyone happy you need to prioritize what the company is trying to achieve, and for whom.
Having a public roadmap can share with the general public what's going to happen in the next ~6-8 months, this can prevent commonly asked features you know about and are currently working on addressing. But it also gives people an idea of where the company is headed, again it helps to communicate with your customers so they can understand and feel appreciated.
What happens after PMF?
First off, understand this is a huge step for the business. A quick Google search and share that plenty of startups fail to achieve this and therefore never become viable businesses. Getting market traction and achieving PMF is a great mountain to overcome that is beyond generic marketing effort, product features, calculating the sales cycle, fielding customer complaints etc. It's really about honing in on your ideal potential customer market, and serving their needs well. Solving their problem and them being able to recognize that (and are willing to pay for that).
Once you have achieved product market fit, it's time to start scaling up your business. This is when you begin to really focus on growing your customer base and expanding sales.
First, you'll need to ensure that you have a reliable source of product supply. If you are manufacturing the product yourself, then this will mean perfecting your production process and establishing relationships with suppliers that can deliver consistent levels of quality and on-time delivery. If you are reselling someone else's products then it means making sure those suppliers can scale with your increasing orders and still meet the high expectations of your customers.
Second, advertising & marketing becomes key. This is where you bring potential customers into contact with your product. You'll want to invest in campaigns that target people most likely to buy your product using demographic data such as age and gender as well as psychographic data such as interests or likes. The goal here is to increase brand awareness while also generating more sales leads & revenue for the business.
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